BioWorld International Correspondent

LONDON - The prospect of a commercial return from the technology that produced Dolly the cloned sheep was effectively killed last week, when Bayer Healthcare LLC announced it was pulling the plug on the development of alpha-1-antitrypsin (AAT), being developed in a US$40 million collaboration with PPL Therapeutics plc.

That follows the announcement by PPL in April that it was abandoning plans to spend £42 million (US$67 million) on a manufacturing plant for AAT, resulting in the write-off of £7.5 million it had already invested in the project.

Bayer, of Research Triangle Park, N.C., said in a press statement, "The resources required to move the project forward, combined with the decision not to build a commercial purification facility because of commercial risk, have led the companies to the decision to place the project on hold."

The decision is devastating for Edinburgh-based PPL, which now faces making redundant between 90 and 140 employees in Edinburgh, and at its farms in New Zealand. The company has called in the consultants KPMG Corporate Finance to advise it on its options, but AAT was a major component of PPL's business, both in terms of its R&D activities and its pilot-scale manufacturing.

The actual number of job losses will depend on the outcome of KPMG's review, which will include an assessment of whether PPL has sufficient critical mass to maintain the viability of the transgenic technology platform.

Geoff Cook, PPL's CEO, said, "We are, of course, deeply disappointed to put this program on hold, one in which both companies have devoted major efforts. The company is taking immediate action to reduce its cash burn and is reviewing additional options to maximize value for shareholders."

PPL underwent a massive restructuring last year to cut its cash burn from £900,000 per month to the current £600,000, focusing on its core technology of producing human proteins in the milk of transgenic animals, and selling off its xenotransplant and stem cell programs. It will need to make further significant cuts in spending to eke out its £10.2 million cash until the launch of its current lead product, Fibrin-I, a tissue sealant to stop bleeding during surgery, due in 2006.

Fibrin-I is not based on the transgenic clone technology that made the company famous, but derived from human plasma, though PPL does have a program to produce the compound transgenically. It is seeking to register Fibrin-I as a medical device in Europe, a shorter regulatory haul than registering a new drug, and the company said it has sufficient funds to bring the product to market.

PPL has secured a manufacturing agreement for the production of Fibrin I and is negotiating to acquire additional intellectual property in the area to build the portfolio.

Cook said restructuring PPL "is a consequence not only of today's decision on AAT, but also the significant opportunity offered by Fibrin-I."

Bayer, the main supplier of plasma-derived AAT, entered the collaboration with PPL in August 2000. The partners were developing recombinant AAT, produced from the milk of transgenic sheep, as an inhaled product to deliver the treatment directly to the lungs of cystic fibrosis and hereditary emphysema patients. The aim was to improve patient acceptability compared to plasma-derived product, which is administered intravenously. However, development was held up last March when the FDA requested further analyses after patients withdrew from a Phase II safety study.

Bayer and PPL are negotiating an agreement giving Bayer the right to restart the project at a later date. PPL will have no development, manufacturing or financial commitments in the program moving forward.